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Mail Bag #13: W-8, Expatriation, 8802, CA Rental, US Dividends, Estate tax, Legal Settlement

Mail Bag #13: W-8, Expatriation, 8802, CA Rental, US Dividends, Estate tax, Legal Settlement
Ines Zemelman, EA
31 March 2018

W-8

Perhaps you would be so kind to answer a question regarding Form W-8BEN? My Austrian boyfriend wants me as co-signature on his bank account in case of accident / sudden death, etc. His bank is not sure, but thinks this form applies to me and asked me to complete the form (even with proof of USA loss of nationality- citizenship). Does the bank realy need to submit such a form to the USA for ex-citizens?

I am uncertain if this form really applies to me, especially since the bank is uncertain if it is necessary! Do you have any information?

If you are currently not a US citizen then you indeed should file form W-8BEN in order to be approved as an account co-owner.

This is the compliance requirement for all banks. If you were US citizen you would have provided form W-9.

W-8

Expatriation

I have now gained UK citizenship and hold a UK passport. In considering expatriation and the determination of 'covered' taxpayer, are property assets valued on the basis of my interest in them (50%) or on a full valuation basis. My husband is British and does not pay US tax and holds the other 50%.

Your interest in UK assets determines your net worth for expatriation purposes - i.e. 50%.

Expatriation

8802

It is essential for me to obtain an IRS fiscal residency certificate for my Spanish tax filings for the years 2015 and 2016, which I just found out about from our Spanish accountant. (We’ll also need that going forward each year, 2017, etc.). Our Spanish accountants have told me that I am supposed to get this from the U.S. so I do not have a tax obligation in Spain for the work I do in the U.S. (I make all of my money with U.S. companies).

I think that’s the second point is the most serious question we have of your firm. Can you help me obtain the certificates annually (starting with 2015 for me - my husband worked in Spain and did not have U.S. income) so I don’t owe Spanish taxes?

Many U.S. treaty partners require the IRS to certify that the person claiming treaty benefits is a resident of the United States for federal tax purposes. The IRS provides this residency certification on Form 6166, a letter of U.S. residency certification. We can help you apply for the certificate if you have filed US resident tax return form 1040 for the year that you request the certificate.

If an individual is a resident of both the United States and the country for which certification is requested, the certification may be denied, unless the individual can establish that the individual is solely a resident of the United States under the tiebreaker provision of the applicable treaty.

8802

CA Rental

I'm a US government employee who had a Permanent Change of Station (PCS) move from CA to Dubai. Currently, I live and work in Dubai. I've cut as many ties as possible to the state. I do not have a bank account there. I sent a change of address to the department of motor vehicles. I changed my address with the post office. I have never voted in California and don't intend to. My car has been shipped away from the state.

That said, I have a rental property in CA. I will file a tax return for that property since it's CA income. How do I stop the income tax from that state? I've submitted a "Stop Tax" form to my government agency. CA income tax is still being pulled.

First and foremost, during tax preparation we will analyze your state tax residency position to verify whether you qualify as a non-resident of the state where you lived before expatriation.

The Safe Harbor rule states that a person whose residence is in California, but who is not in California because of a contract related to their employment for 546 days (consecutively) or more, will be seen as a nonresident. It has nothing to do with "cessation of ties with the state. If you qualify for Safe Harbor, you do not need to take any of those steps. However, your employer may be required to withhold state tax because you need to have a home of record. In this case, you can only rely upon claiming refund on CA non-resident tax return.

CA Rental

US Dividends

I'm a UK citizen who previously worked in the US. While there I purchased MSFT stock which is now worth quite a bit. I receive a dividend of over 4k GBP per annum. Do I have to file a US tax return? Will I owe capital gains tax?

Good job on the investment! You are not required to file a US tax return if the bank made withholding equal or exceeding required tax amount). If withholding was equal to 15% of annual dividends amount then you don't need to file. If more - then you may want to claim the refund of excessive tax withheld. To do so you would need to file a US nonresident tax return. You should also have a W8-BEN on file with your broker (and check that it is current and not expired). If it expires, then 30% of proceeds (not just profits) will be deducted at the source and you will be required to file a non-resident tax return to reclaim the overwithheld tax. UK citizens not residing in the US will not have to pay US capital gains tax.

US Dividends

Estate tax

My mother passed away in 2016 and I (her daughter) am looking to correct her tax status posthumously. Is this necessary? Should I be filing the streamlined procedure?

Firstly - our condolences for the loss of your mom. To your question - yes, it is necessary to get compliant (even posthumously) & if applicable the Streamlined Program is necessary. Banks (US and foreign) may not release the estate until the heirs confirm the US tax compliance of the deceased.

Estate tax

Legal Settlement

I am a client of your company as you might see, having filed my income tax returns in the last years. I am a US citizen with double citizenship (US and Italian) and living in Italy.

I should soon receive money from an Italian court for damages caused by an Italian public entity (legal action initiated by my mother who died while in the meantime). It is about land expropriated for the construction of an Highway. In Italy this kind of compensation is not taxed. What is the standard in the US ? Should I declare it on my future income tax return?

Legal settlement for direct damages is non taxable. If there were punitive damages in addition to direct damages then punitive damages are taxable.

Legal Settlement

Ines Zemelman, EA
founder of Taxes for Expats